Safety Regulation for Small LPG Distribution Systems (2018)

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81 Congress called for a study of the regulatory requirements that apply to pipeline systems used to distribute liquefied petroleum gas (LPG) to 100 or fewer customers. Congress wanted to know how these requirements, as imposed and implemented by federal, state, and local authorities, pertain to these small systems and work together to assure that appropriate and safe practices and techniques are used for facility design, installation, operation, and maintenance. Informed by this review, including any potential opportu- nities revealed for limiting federal regulation applicable to smaller systems without reducing safety, the study committee was asked to advise on ways to improve the application of the regulatory requirements, particularly the federal requirements, where appropriate. The preceding chapters provide the background and analysis that in- formed the committee’s advice, which is provided in this chapter in fulfill- ment of the study charge. Chapter 2 describes the basic characteristics and use of LPG distribution systems that are subject to federal safety regulation. Chapter 3 discusses the hazard characteristics of LPG and examines the safety performance of LPG pipeline systems, as indicated by incident data reported to the Pipeline and Hazardous Materials Safety Administration (PHMSA) and others. Chapter 4 describes what is known about the number, location, and size distribution of these pipeline systems and discusses concerns raised by the LPG industry about regulatory requirements that have questionable relevance to, and impose a large compliance burden on, small LPG systems. That chapter concludes with a summary assessment of the issues raised by industry that addresses what is known about these small pipeline systems and the safety effect of the federal regulatory requirements in question. 5 Summary Review and Advice

82 SAFETY REGULATION FOR SMALL LPG DISTRIBUTION SYSTEMS The review and assessment proved challenging because of the limited data on these small LPG systems, especially data that would allow for the assessment of specific federal regulatory requirements with regard to their safety effects and compliance burden on operators of small systems. After recapping the key points and findings from these earlier chapters, this chapter contains the committee’s advice to Congress and PHMSA on ways to make more informed decisions about the regulation of small LPG pipeline systems. KEY POINTS AND FINDINGS Characteristics and Use of Small LPG Pipeline Systems Having relatively few components, the basic LPG pipeline distribution sys- tem consists of a stationary aboveground or underground pressurized stor- age tank, two pressure regulators, service lines, and meters, which connect to one or more user’s piping for uses such as cooking, drying, and space and water heating. The tank is refilled periodically by an LPG supplier using a truck dispatched from a bulk storage plant. LPG suppliers consist of many small- to medium-sized firms focused on serving a limited geographic area, as well as three large firms with operations nationwide. Generally, suppli- ers also act as the operators for these systems on behalf of the users, who contract for service. LPG distribution systems comprise a small but important portion of the total U.S. energy infrastructure network. They are most prevalent in rural areas and other locations where natural gas connections are unavailable. Although approximately 12 million U.S. customers consume LPG,1 only a fraction of those LPG customers are connected to federally regulated dis- tribution systems. The overwhelming majority of LPG distribution systems consist of a single source of LPG supply, either as one tank or multiple tanks manifolded together, connected to a single customer; nearly all of these single-user systems are not subject to federal pipeline safety regulations. The multi-customer systems are intended to provide a more convenient and economical alternative to supplying gas fuel using an individual storage tank housed on each customer’s property. The systems serve both residential and business customers, with some serving as few as two customers and others serving hundreds. These distribution systems are small compared to other gas distribution systems. An LPG system with 500 customers would be considered very large, while natural gas systems usually measure their 1 U.S. Energy Information Administration, “Residential Energy Consumption Survey (RECS),” accessed December 19, 2017, https://www.eia.gov/consumption/residential/data/2015/index. php?view=characteristics. This figure excludes households that use LPG only for outdoor grilling.

SUMMARY REVIEW AND ADVICE 83 customers in the thousands or tens of thousands. Examples of LPG distri- bution system applications are tract housing subdivisions, condominiums, mobile home parks, resorts, and strip mall shopping centers. A definitive count of small, multi-user LPG pipeline distribution sys- tems that are subject to federal regulations is not available. Based on the results of a questionnaire administered by the National Association of Pipeline Safety Representatives (NAPSR) and information provided by representatives of the LPG industry, it would appear that there are between 3,800 and 5,800 multi-user systems, most serving fewer than 50 customers and likely to have a number of customers closer to 10 than 100. LPG Hazard Characteristics and System Safety Performance When released inadvertently, LPG (be it propane, propylene, butane, or isobutane) behaves differently than natural gas. The higher relative vapor density of LPG, which makes it heavier than air, can cause it to creep along the ground or migrate underground. This can lead to pooling in concentra- tions that are within LPG’s flammability limits rather than dispersing into the atmosphere like natural gas, which is lighter than air. Also, because it is stored as a liquid, LPG can expand to 270 times its size as it vaporizes, potentially swelling into a flammable vapor cloud that adds to the risk of handling LPG liquid during transfers, such as from delivery trucks or from one tank to another. Nevertheless, LPG pipeline distribution system incidents are rare. PHMSA records of federally regulated LPG distribution systems for more than the past 30 years suggest an average of less than one incident involving a fatality or serious injury per year. Incidents reported by operators to PHMSA from 2010 through 2017 include 10 incidents, seven injuries, and approximately $2 million in property damage. No fatalities have been reported since 2006. Incorporating fire events from the National Fire Incident Reporting System with the PHMSA incident data suggests that the number of incidents involving LPG distribution systems averages in the single digits per year. Because serious incidents involving them are rare, and because of their relatively simple construction and operation, the pipeline systems that distribute LPG are generally viewed as safe. However, the consequences of incidents can be severe. Four incidents involving multi-user pipeline systems illustrate how LPG can behave and present hazards when transported. In Parkers Prairie, Minnesota, in 1991; San Juan, Puerto Rico, in 1996; and Snow Hill, Maryland, in 2002, LPG released from pipeline distribution systems migrated underground, pooled in low-lying areas, and ignited to cause explosions and fires. The number of fatalities in these three incidents was one, 33, and one, respectively. A ruptured LPG pipeline led to gas traveling through soil, igniting, and killing two individuals at a resort in

84 SAFETY REGULATION FOR SMALL LPG DISTRIBUTION SYSTEMS Door County, Wisconsin, in 2006. While the specific factors contributing to these incidents differed, they each involved a lack of adequate familiarity with LPG properties and behavior (its tendency to sink to low areas) and leaks that were undetected while the gas accumulated. Safety Regulation and Enforcement Safety regulation and oversight of LPG pipeline distribution systems is a combined federal and state responsibility, with significant involvement by the National Fire Protection Association (NFPA). PHMSA sets federal minimum requirements for safety, while states have the option of applying an additional overlay, usually administered and enforced by a public util- ity commission. Federal and state regulations also incorporate standards established by NFPA by reference. PHMSA regulations are wide-ranging, covering facility design, con- struction, operations, and maintenance, as well as operator training, integ- rity management, and public awareness. Some of the regulations pertain to all types and sizes of gas pipeline distribution systems, while others distinguish between small and larger systems, for instance by reducing the number and stringency of requirements for small LPG systems. In the case of intrastate pipelines, including LPG distribution systems, individual states have the authority to impose requirements that are more stringent than those imposed by PHMSA. Both federal and state regulations of LPG distribution systems rely sig- nificantly on NFPA consensus standards, which PHMSA has incorporated by reference into the federal safety standards, namely NFPA 58, Lique- fied Petroleum Gas Code, and NFPA 59, Utility LP-Gas Plant Code. The NFPA codes focus largely on the specifications for and installation of the tanks and piping and components such as valves and regulators. They also contain requirements for the safe transport and transfer of LPG liquid. In cases in which there is a conflict in the federal and NFPA requirements, the federal regulations state that the LPG-specific NFPA codes prevail. Notably, the NFPA codes provide few requirements pertaining to system operations and maintenance. PHMSA’s regulations are intended to address these as- pects of system safety assurance. PHMSA’s regulations are adopted and updated through the federal rulemaking process, while states have their own administrative procedures for developing and implementing their regulations. NFPA manages its standards development process by convening a technical committee every 3 years to ensure that the standards reflect current technologies, engineering practices, and scientific principles. Updates to NFPA standards applicable to LPG systems tend to outpace updates to the applicable federal regulations, which incorporate the 2004 edition of NFPA 58 (now in its 2017 edition).

SUMMARY REVIEW AND ADVICE 85 This is due in large part to the pace of the federal rulemaking process and in part to a concern PHMSA had about a revision to the operations and maintenance chapter in the 2008 edition of the code. These federal, state, and consensus standards are enforced by PHMSA or state regulators. PHMSA certifies most states to monitor and enforce compliance with federal regulations. These state safety authorities receive grants from PHMSA to support their compliance activities. Nevertheless, there can be considerable variation across states in their enforcement activi- ties due to many factors. In some cases, the variability can be explained by differences in circumstances—for instance, northern and coastal states may place greater emphasis on design criteria for snow loads and prevention of corrosion than state regulators from warmer and noncoastal regions. There can be substantial state-to-state variability in regulatory interpretations, including interpretations of the criteria used for determining when an LPG system is subject to federal regulation. PHMSA distinguishes a system as being jurisdictional or non-jurisdic- tional—that is, subject or not subject to federal regulation—based in part on whether the system is in a “public place.” While examples of a public place are offered in PHMSA guidance documents, the regulatory definition is not precise. Consequently, several state regulators apply different inter- pretations of a public place in carrying out their pipeline safety programs. Accordingly, a single national or regional firm operating identical systems will find that they are jurisdictional or non-jurisdictional from one state to the next. The NAPSR questionnaire results show wide discrepancies among states in the number of very small multi-user systems identified as juris- dictional, which is potentially indicative of large geographic variability in the size and uses of LPG distribution systems, wide variability in state application and enforcement of the federal Part 192 regulations, or both. The most striking result is that nearly all of the systems having two to nine customers were reported from only four states, suggesting considerable variability among states in the interpretation of what constitutes a public place, which is a determinant of jurisdictional status for systems having fewer than 10 customers. Regulatory Applicability and Industry Concerns Although the study charge implies an examination of the costs and benefits of the safety regulations governing small LPG pipeline systems, the commit- tee recognized early in its deliberations that a formal cost–benefit analysis of regulatory issues would not be feasible due to data limitations, especially a paucity of information on the number of small LPG systems and the ex- tent to which they vary in size, configuration, and other factors that could

86 SAFETY REGULATION FOR SMALL LPG DISTRIBUTION SYSTEMS affect their risk. However, the study did surface a number of concerns about the safety regulatory requirements and how they are implemented. LPG industry representatives raised concerns about the cost burden of complying with many federal requirements that they contend have ques- tionable relevance to small LPG systems already subject to NFPA require- ments. Some representatives stated that LPG pipeline operators may be incentivized to divide their systems into smaller units to avoid the jurisdic- tional threshold, thereby reducing compliance costs and avoiding inconsis- tent enforcement treatment. State regulators and industry representatives alike expressed concern that a proliferation of storage tanks supplying smaller distribution systems could increase the overall risk profile of LPG pipeline systems, in part because of the need for more LPG liquid transfer operations when refilling tanks. Limited data on the number of small LPG systems by size prevented the committee from assessing these claims and their potential safety impacts. When asked to identify the federal requirements they believe to be especially burdensome and have questionable safety value when applied to LPG systems having fewer than 100 customers, industry representatives focused on several issues. They pointed to a few prescriptive commands that they claimed added little value in light of the NFPA standards, such as performing odor testing with an instrument, as opposed to less costly methods required by NFPA code. They also questioned the need for some of the federal requirements governing system inspection and testing when the NFPA code addresses these matters in some fashion, including certain requirements for personnel training. They raised concern about federal re- quirements for planning, registration, and documentation that they believe have little applicability to small LPG systems, such as the obligations to cre- ate site-specific emergency response plans, liaise with local fire departments, and provide public awareness notifications to customers every 6 months. They maintained that these required plans and programs can be costly to develop and susceptible to varied interpretations of the state regulators responsible for enforcement. The committee was not able to assess the validity of these industry claims for a number of reasons, including an inability to examine the impact of individual requirements on the safety of small LPG systems that are char- acterized by significant heterogeneity in configuration, condition, and set- ting. Nevertheless, some of the information and analysis in the report raises questions about the safety benefits conferred by the federal requirements when applied to small jurisdictional LPG systems, especially the smallest systems, which are not even being identified by many states for regulatory compliance. Because these systems may be presenting safety risks that have not been documented, it is difficult to know whether more rigorous iden- tification and enforcement is warranted or whether their coverage under

SUMMARY REVIEW AND ADVICE 87 the federal regulatory program should be eased. It is with this purpose in mind—to inform the development, application, and enforcement of safety regulations that align better with the safety risks of small LPG systems—that the committee offers the following advice to Congress and PHMSA. RECOMMENDATIONS Based on the information and assessment in this report, the committee recommends a set of actions aimed at providing more effective regulatory oversight and safety assurance of small LPG distribution systems. These actions are intended to address the following findings and conclusions that raise questions about the efficacy of the current state of regulatory oversight and safety assurance: 1. Responses to the NAPSR questionnaire by state pipeline safety regulators suggest that many small, multi-user LPG systems that should be subject to the federal Part 192 pipeline safety regulatory requirements—that is, “jurisdictional”—are not being identified by enforcement programs, and thus are not being regularly inspected for compliance with these federal requirements. 2. Although the exact reasons for state-to-state variability in the identification of small, multi-user LPG systems for enforcement of the Part 192 regulations could not be ascertained from the NAPSR questionnaire, one possible cause is ill-defined criteria for jurisdic- tional coverage, especially in what constitutes a public place, which is a determinant of jurisdictional coverage by multi-user systems having nine or fewer customers. It is possible that the observed variability stems from inconsistent interpretation and application of this definitional criterion by system operators and state regula- tors. Another possible cause is that states differ in their efforts to oversee and enforce regulatory compliance by operators of small, multi-user LPG systems. Some states may perceive a low safety risk from these smaller systems, causing them to allocate fewer resources to their identification and inspection relative to the larger systems. The committee cannot know for sure whether states are making such risk-balancing choices and whether those choices are appropriate given other state enforcement demands. 3. Irrespective of the reasons that many small, jurisdictional LPG sys- tems are not being identified for compliance with federal Part 192 requirements, the result is incomplete information on the number, location, characteristics, and safety performance of these systems, which complicates assessments of their safety risks, how the specific requirements of federal regulations pertain to those risks, and the

88 SAFETY REGULATION FOR SMALL LPG DISTRIBUTION SYSTEMS extent to which the requirements are being complied with and effec- tive in controlling risks. Given this evidence of variability in regulatory implementation and lack of assurance that many small LPG systems are indeed complying with the federal regulations, the committee believes that it would be a mistake to view the current regulatory regime as being operative and that steps should be taken to better identify small systems to ensure that regulatory require- ments and their enforcement are appropriate to the safety risks they present. It is with these safety aims in mind, and out of concern about discrepant implementation of the current regulatory regime, that the committee offers the following recommendations: Recommendation 1: Congress should direct PHMSA to ensure that the regulatory term “public place” is defined in such a way that regulators and regulated entities alike will uniformly interpret that definition to establish jurisdiction over LPG pipeline systems under the Code of Federal Regula- tions (CFR) Title 49, Part 192, Transportation of Natural and Other Gas by Pipeline. Recommendation 2: Congress should direct PHMSA to require • Operators of LPG pipeline systems to report to regulators the loca- tion and number of customers served by each of their jurisdictional systems; and • States to confirm that all identified jurisdictional systems are sub- ject to regular enforcement and inspection activity, which should include a review of operator-reported data on leaks and damage. Recommendation 3: Seeking the authority and resources from Congress as needed, PHMSA should • Allow only those states that have confirmed the identification and inspection of their jurisdictional LPG pipeline systems, as recom- mended above, to seek the agency’s permission to implement a waiver program in which a regularly inspected jurisdictional system with fewer than 100 customers is eligible to apply to opt out of any Part 192 requirement the state determines is inapplicable to that system’s risk factors, other than the NFPA requirements incor- porated by reference in Part 192 and requirements for a Damage Prevention Program (49 CFR § 192.614); • Stipulate that in addition to having fewer than 100 customers, sys- tems eligible for a waiver should meet certain low-risk profiles as identified by the state with guidance and approval from PHMSA; and

SUMMARY REVIEW AND ADVICE 89 • Require that states periodically seek permission from PHMSA to renew their waiver programs by providing evidence that public safety has not been compromised by the waivers. CONCLUDING COMMENTS The committee believes that its recommendations are complementary and will work together to inform sound decisions about the application of regulatory requirements and their enforcement. A commonly understood definition of public place will better ensure the identification of all small, jurisdictional LPG systems by PHMSA and state regulators. A requirement that operators of LPG pipeline systems report the location and number of customers served by their jurisdictional systems will assist regulators in identifying systems for enforcement and inspection activity. The re- quirement to perform such inspections of operator-identified systems on a regular basis should increase the state regulators’ familiarity with the characteristics, conditions, and safety performance of the LPG systems, which in turn will assist states and PHMSA in making more risk-informed determinations of regulatory requirements that are most suitable to small LPG systems and deserving of enforcement attention. The recommended authorization of a waiver program is intended to allow states and PHMSA to make such risk-informed determinations about regulatory application and enforcement, as opposed to determinations that are based simply on system size.